Understanding Difficulty in Proof-of-Work Blockchains

In proof-of-work based blockchains like Bitcoin, adding new blocks to the chain involves mining, which requires solving cryptographic puzzles.

The Bitcoin blockchain is designed to add a new block approximately every 10 minutes.

Evolving Mining Technology

However, as predicted in the Bitcoin white paper, the speed at which these cryptographic puzzles are solved decreases over time due to advancements in hardware technology.

This shift in mining technology can be observed from conventional desktop or laptop computers to GPUs, and now to specialized ASICs that are operated in large, highly regulated farm environments.

Adaptive Mining Difficulty

Cryptographic puzzles are made more difficult to account for the increasing speed of the hardware.

The difficulty level is constantly adjusted to maintain a specific number of blocks mined per hour.

The increase in difficulty on the Bitcoin blockchain has been remarkable.

When BTC creator Satoshi Nakamoto mined the genesis block, it was likely done on a regular desktop computer, and the difficulty was set at 1.

Bitcoin Mining Rewards

Successful Bitcoin miners are rewarded with new coins.

However, Bitcoin has a predetermined upper limit on the number of blocks that can be mined.

Once this limit is reached, no new coins will be created, but mining or hash power will still be necessary for the network to function.

The mining rewards will shift to incentivize miners to continue supporting the network.

Instead of receiving new coins, successful miners will receive a portion of the transaction fees associated with using the network.